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Md. officials hope tax exemption will spur spending

August 05, 2010|By ANDREW SCHOTZ

Maryland might lose about $19 million in an upcoming sales-tax-free week, but a retail spending surge could help jumpstart the economy, Comptroller Peter V.R. Franchot said Thursday.

The state sales tax was waived for five days in 2006 and a week in 2001.

Franchot's office had no information on the 2006 impact, but said the state lost about $5.1 million in revenue during the 2001 week, less than a projection of $6.7 million.

Retail sales rose about 10 percent, more than the prediction of 7.4 percent.

This year's tax exemption will begin Sunday and run through Aug. 14, when many families are expected to do back-to-school shopping.

Clothing and footwear priced at no more than $100 is eligible for a waiver of the 6 percent sales tax.

Franchot has traveled across Maryland to promote the exemption week and on Thursday was at Prime Outlets in Hagerstown with state Sen. Donald F. Munson, Washington County Commissioners President John F. Barr and Maryland Retailers Association President Patrick Donoho.

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"This is about jobs, jobs, jobs and more jobs," said Munson, who is facing a challenge from Del. Christopher B. Shank in next month's Republican primary.

Munson said labor and jobs will be needed to replenish purchased goods.

Franchot said the exemption week lets people keep some of their money.

On Wednesday, the Tax Foundation -- which identifies itself as a nonpartisan tax research group -- held a conference call to criticize sales tax-exemption periods.

Mark Robyn, a staff economist, called them a "political gimmick" that merely shifts buying from one period to another.

Robyn also alleged that increased spending can't be fully attributed to exemption periods and the effort distracts from having a truly fair tax policy.

Asked Thursday to respond, Donoho and Karen Fluharty, the senior vice president of marketing for Prime Retail, disagreed.

Fluharty said back-to-school shopping is an established retail pattern that doesn't shift.

Donoho said retail sales before and after the 2001 tax-free week were comparable to what they were in other years, contradicting the theory of rescheduled buying.

He said an exemption week lets Maryland retailers compete against Virginia, which is waiving sales tax on school supplies, clothing and footwear Friday through Sunday; and Delaware, which has no sales tax and also lets retailers compete for Internet and mail-order sales.

Some items taxable, while others are exempt



Items of clothing and footwear costing no more than $100 will not be subject to sales tax in Maryland from Sunday through Aug. 14.

The state comptroller's office has a list of which items are taxable and which are exempt. For example:

o Taxable -- aprons, backpacks, bandanas, bow ties, earrings, Heelys (wheeled tennis shoes), ice skates, scuba gear, veils, zippers

o Exempt -- adult diapers, bath robes, bras, flip flops, fur coats and stoles, lingerie, pajamas, shorts, suspenders, tuxedos (sold or rented)

For a full list, go to http://www.comp.state.md.us/shopmd/default.asp and click on "Exempt vs. Taxable Purchases."

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